20210625

<About Stock Markets>The Policy Gradual Change for Stability, and the Sector Rotation is In Time

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Last month, the author stated that the flow of hot money has an impact on inflation risks. The US consumer price index CPI in May jumps 5%, and the core CPI increased by 3.8%, which is the highest since 1992, this surprised the market, and they worried about will be the impact of inflation on the economic development. Given this, the U.S. Federal Reserve’s interest rate announcement in June indicated that economic growth is stronger than expected and inflation is higher than expected. Therefore, many Fed officials tend to adjust their easing policies as soon as possible.  

Members generally estimate that by the end of 2023, the interest rate will be raised twice, and although there is no explicit statement to reduce the scale of debt purchases, the only measures on raising the excess reserve interest rate and the overnight reverse repurchase interest rate, have made the market expect it will start again before the end of this year. And there will be more news coming when the interest rate is negotiated in September. In any case, even if the Fed takes any action, the author is sure that it will be quite orderly. It will not come without warning. It is the main task of the Fed to always manage market expectations and maintain stable economic development. It is more beneficial to reduce volatility, so investors do not need to be too worried. 

Interest rate hikes have put pressure on investment tools that do not have cash flow. For example, cryptocurrencies have fallen sharply again, and Bitcoin once drops below $30,000, which is lower than the May low. After the mainland government suppression, it has been quite difficult to regain the upward trend in short term. The price of gold also dropped from US$1,900 to US$1,783.85 at the time of writing. Due to the gradual Fed’s policy’s hawkish turn, cryptocurrency and gold prices are still under pressure in the short term. The main support for the gold price is around 1,680, and you can consider selling at the current price. U.S. stocks have a relatively small impact. The Nasdaq and S&P 500 are still strong, but they rely on large-scale stocks to "hold up" their trends. The overall market atmosphere is up and down. The EURO 2020 has distracted investors to some extent, due to insufficient transactions, so don't worry too much in the short term. 

As for the Hong Kong stock market, the trend improved at the end of May, but when it turned into June, it weakened again. It reached a high of 29,490 and fell after three months of the new high. After reaching a low of 28,216, it followed the expected cooling of the US interest rate hike and rebounded to 28,817 points at the time of writing, 1.1% lower compared to the previous month. The short-term trend successfully found the bottom, challenging the 20-day position, and the volatility also narrowed. There was a double bottom that broke through the neckline pattern and rose above 28,830. It is expected that the trend in July to improve further, and the opportunities of upward above 29,444 are relatively optimistic. The Hang Seng China Enterprises Index and the Hang Seng Technology Index showed similar trends to the market. However, the performance of individual stocks in June was extreme. Shipping stocks, automotive stocks and energy stocks were the main players. CNPC (857) rose by 18.9% in June, outperforming most of the advantaged stocks, a rare year in recent years. In contrast, mainland real estate stocks and mainland education stocks are expected to have a new round of sector conversions after July, and you may choose stocks that have fallen sharply earlier, hope for a "rebound". 

The Kingboard Laminates (1888) recommended last month was constrained by the market at the beginning of June. The price once fell below 16.50, but on the day of writing, it finally "exploded" and it reached 17.88 and reported 17.74. Due to the breakthrough of large transactions, the market is expected to be more optimistic, and the main target price is 19.50 in the 3rd quarter. 

The author’s recommendation this month is Kangji Medical (9997). At the end of last month, another industry peer named Chuang tong qiao – B (2190) IPO drove the share price of the former to rise. In fact, Kangji Medical products are not similar to Chuangtong’s, Kangji is the largest minimally invasive surgical instrument and accessories (MISIA) platform in China. It mainly produces disposable minimally invasive surgical products (such as trocars and ligature clips). The company itself has maintained profitability for a long time, and its gross profit margin in 2020 It is 84% ​​higher, and the balance sheet is very "clean", with a debt ratio of 2.85% (yes, it is 2.85%). Most of the funds from the listing are still unused, so the cash flow is as high as RMB 2.232 billion. It will further expand in the future, and net profit growth is optimistic. The company invested this year in a strategic investment in Jing feng Medical, the only company in China that has mastered the technology of single-hole surgical robots and multi-hole surgical robots. (Financing before the B round of listing). In the second half of the year, the minimally invasive surgical Robot from the same industry peer went public, the concept of “related stock industry” could be used again. There is a trend of breaking resistance recently, the midline can be up to 17.50, and the main goal is to rebound the golden ratio of 0.382 (ie 19.3).

 

Kay Ho (CE No.: ANV293)

Acer King Capital Hong Kong Limited

 

Statement: The author is a licensee of the 1st, 4th, and 9th types of licenses of Securities and Futures Commission, SFC. Acer King securities Limited and Acer King Capital Hong Kong Limited are affiliated companies of Hantec Group and were invited to contribute articles in Hantec Group's monthly newsletter. The writing does not represent the position of Hantec Group. As the author does not personally hold the above-mentioned shares, investors should exercise caution when buying or selling relevant securities and investment instruments.

 


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